WK Kellogg’s shares surged nearly 50 per cent before the bell on Thursday (Jul 10) after several media outlets, including Reuters, reported that the Italian candy maker behind Ferrero Rocher is close to buying the cereal maker, a deal that would unite two of the world’s most recognisable consumer food companies.
Shares of the Michigan-based company hit US$26.93, their highest since the maker of Fruit Loops and Frosted Flakes was spun off in 2023.
Ferrero could finalise the roughly US$3 billion deal as soon as this week, according to the Wall Street Journal, which first reported the talks on Wednesday.
WK Kellogg had a market capitalisation of US$1.51 billion, as of Wednesday’s close.
“(The) magnitude of (the) premium (is) a surprise – if accurate, hard to envision another bidder coming over the top or deal rejection,” Jefferies analysts said.
The company was spun off from Kellanova and holds the North American cereal business of Kellogg, the original parent.
Meanwhile, Cheez-It maker Kellanova is in the process of being acquired by candy giant Mars in a nearly US$36 billion deal.
“With its focus on the mature, domestic cereal aisle, we’ve thought WK’s sales prospects would be muted, but believe a deal could enable it to benefit from Ferrero’s product and geographic reach,” Morningstar analysts Erin Lash said in a note.
WK Kellogg and other packaged food companies have flagged subdued demand due to cautious consumer spending in the US following consistent price increases by firms trying to navigate higher input costs.
Packaged food makers are also under pressure from Health Secretary Robert F Kennedy Jr’s Make America Healthy Again Commission to eliminate the use of synthetic dyes.
The maker of Nutella hazelnut spread, Ferrero, has turned into a global group, boosted by the aggressive acquisition campaign launched by its Executive Chairman Giovanni Ferrero.
A potential deal would mark the company’s biggest acquisition in recent years. In 2018, Ferrero bought Nestle’s US confectionery business for US$2.8 billion.
The group reported a turnover of €18.4 billion (US$19.2 billion) in the financial year ending on Aug 31 and said it had increased its investments to boost manufacturing capabilities and expand across categories.
